Finance

What spending choices does the Welsh Government face, and what might it prioritise?

On 25 September, the Assembly will debate the Welsh Government’s spending priorities, in advance of the publication of the Welsh Government’s 2020-21 draft budget later this year. This debate is the first of its kind in the Assembly, and was instigated by the Finance Committee. In Plenary on 17 September, the Minister for Finance and Trefnydd highlighted her intention to introduce the Welsh Government’s draft budget 2020-21 in November 2019, following the publication of the UK Government’s Spending Round 2019. As context to this statement, our blog post on the UK Spending Round highlights that the Welsh Government’s fiscal revenue in 2020-21 will be £14.8 billion before block grant adjustments, an increase of £593 million in comparison to the 2019-20 baseline. The Welsh Government’s capital budget will increase from £2.2 billion to £2.3 billion over this period. However, the First Minister has said that he is not confident that this sum will definitely come to Wales, as it has not yet been voted through by the UK Parliament. In his view, this may not happen for a number of reasons including prorogation, the possibility of a general election, and the UK Government not having a majority in the House of Commons.

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23 September 2019

Darllenwch yr erthygl yma yn Gymraeg | View this post in Welsh

On 25 September, the Assembly will debate the Welsh Government’s spending priorities, in advance of the publication of the Welsh Government’s 2020-21 draft budget later this year.  This debate is the first of its kind in the Assembly, and was instigated by the Finance Committee.  

In Plenary on 17 September, the Minister for Finance and Trefnydd highlighted her intention to introduce the Welsh Government’s draft budget 2020-21 in November 2019, following the publication of the UK Government’s Spending Round 2019. 

As context to this statement, our blog post on the UK Spending Round highlights that the Welsh Government’s fiscal revenue in 2020-21 will be £14.8 billion before block grant adjustments, an increase of £593 million in comparison to the 2019-20 baseline.  The Welsh Government’s capital budget will increase from £2.2 billion to £2.3 billion over this period.  However, the First Minister has said that he is not confident that this sum will definitely come to Wales, as it has not yet been voted through by the UK Parliament.  In his view, this may not happen for a number of reasons including prorogation, the possibility of a general election, and the UK Government not having a majority in the House of Commons.

What are the Welsh Government’s budget priorities for 2020-21?

The Minister for Finance and Trefnydd  set out the Welsh Government’s eight budget priorities for 2020-21 in a Plenary statement on 16 July.  These are:

  • Early years;
  • Social care;
  • Housing;
  • Skills and employability;
  • Better mental health;
  • Decarbonisation;
  • Poverty; and
  • Biodiversity.

In her statement of 17 September, the Minister set out the rationale for focussing on these areas, stating that:

We recognise that these eight areas are the ones that have the greatest potential contribution to make to long-term prosperity and well-being. They reflect the times in people’s lives when they may be most in need of support, and when the right help can have a dramatic effect on their life course. They are priority areas where it has been shown that early intervention—tackling the root causes, rather than treating symptoms—pays dividends. If we are to realise the full potential of the well‑being of future generations Act, then integration and collaboration between activities and services, with an early intervention and people-centred approach, is essential to delivering long-term outcomes.

The Minister for Finance and Trefnydd has also highlighted that, in the event of a ‘no deal’ Brexit, the Welsh Government would need immediate financial support from the UK Government, as the existing budget settlement would not enable it to address even a proportion of the impact of this scenario.  The Welsh Government published Preparing for a no deal Brexit, its action plan for responding to this scenario, on 16 September.

What choices might the Welsh Government need to make in its budget allocations?

Wales Fiscal Analysis suggests that (PDF 428KB) the block grant increase for 2020-21 will allow the Welsh Government to increase funding for more of its priorities than it has been able to do over the austerity years of the last decade.

It argues that the big choice facing the Welsh Government is how much to allocate to health and social services in 2020-21.  It outlines the potential implications of three NHS funding scenarios for the rest of the Welsh Government’s fiscal revenue budget:

  • If the Welsh Government matches the 3.1% real-terms fiscal revenue increase in English NHS spending in 2020-21, it would be able to give a 1.4% real-terms fiscal revenue increase to all other devolved public services;
  • If the Welsh Government awards NHS Wales a 2.8% real-terms increase in fiscal revenue in 2020-21, to match the English NHS increase per person, it would be able to give a 1.7% real-terms fiscal revenue increase to all other devolved public services; and
  • If the Welsh Government continues its trend of awarding NHS Wales a 2.3% real-terms increase in fiscal revenue in 2020-21, it would be able to give a 2.2% real-terms fiscal revenue increase to all other devolved public services.

Wales Fiscal Analysis states that it would be risky for the Welsh Government to commit funding to particular services for more than one year without knowing the implications for the rest of its budget.  It also suggests that the Welsh Government should consider paying into its reserve, to provide some mitigation should further austerity occur in upcoming years.

What work has been done by the Assembly ahead of the 2020-21 draft budget?

The Assembly’s Finance Committee undertakes scrutiny of draft and supplementary budgets throughout the year, making recommendations to the Welsh Government and following these up in subsequent work.

Additionally, the Northern Ireland Assembly Public Finance Scrutiny Unit and Senedd Research Financial Scrutiny Unit identified key themes from Assembly Committee scrutiny in their analysis of the Welsh Government’s draft budget for 2019-20.

The Finance Committee held a stakeholder session (PDF 136KB) in Aberystwyth on 27 June, at which individuals and organisations set out their views on the areas the Welsh Government should prioritise.  These priorities have informed the Committee’s scrutiny of the draft budget, which it is currently consulting on until 25 September.  The Committee’s work will focus on:

  • The Welsh Government’s approach to preventative spending and how this is represented in resource allocation, particularly for local health boards and health and social care services;
  • Sustainability of public services, innovation and service transformation;
  • Welsh Government policies to promote economic growth and innovation, reduce poverty, gender inequality and mitigate welfare reform;
  • Planning and preparedness for Brexit;
  • How the Welsh Government should use taxation and borrowing powers, particularly in relation to the Welsh Rate of Income Tax;
  • How evidence is driving Welsh Government priority setting and budget allocations;
  • How the Well-being of Future Generations Act is influencing policy making; and
  • Clarity around how the Welsh Government intends to respond to its declaration of a climate emergency, and how this will be resourced.

The choices that the Welsh Government makes in these areas, and more, will be scrutinised by the Finance Committee when the draft budget is published.  The Organisation of Economic Co-Operation and Development (OECD) recommends that the budgetary process should provide opportunities for parliaments and committees to engage at all key stages of the budget cycle.  This is the first time Assembly Members have debated the Welsh Government’s budget priorities ahead of publication of the draft budget, and it remains to be seen how this develops in future.


Article by Gareth Thomas, Senedd Research, National Assembly for Wales

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